14.01.2018, 13:32

Carillion on Verge of Collapse

Carillion is holding weekend crisis talks with the UK government after failing to secure extensions to its banking covenants on Friday, and is expected to go into administration as early as Monday with estimated debts of £1.4bn (of which £580m is accounted for by a pensions deficit).

The news follows a volatile week for the FTSE 250 construction and support services outsourcer which was forced to issue a statement to the London Stock Exchange (LSE) on Tuesday stating there had been no material change in its trading circumstances, following a six-day share rally on the back of rumours of progress in securing fresh capital for an ambitious restructuring programme.

It was reported during the week that the government has drawn up contingency plans to re-allocate contracts awarded to one Britain's largest support services companies. Carillion employs 48,500 people in the UK, Canada, and the Middle East.

Consultancy firm EY has also been placed on alert in the event of a declaration of insolvency by the group.

A Carillion collapse is likely to have significant impact on the United Kingdom's facility support services sector, and result in a sell-off of shares in competitors with similar business models that combine construction and facilities management offerings.

Interserve and Mitie which have been struggling in a market characterised by high-value, low margin contracts, are particularly vulnerable to changing investor sentiment, despite upbeat recent profits forecasts from both companies.